Hamm/Jones vs. Ameriquest Mortgage Securities et al

(United States Court of Appeals for the Seventh Circuit)

For want of a word, a disclosure failed. For want of the disclosure, the lender lost. There are two things that are remarkable about this decision, handed down on October 17, 2007. First, it points out the fact that a lot depends on the court that hears a case -- at least until the appeal. Second, this ruling emphasizes what compliance experts have known for a long time -- "when it comes to TILA, 'hypertechnicality reigns.'"

Sarah Hamm and Shirley Jones each sued Ameriquest and two of its affiliates on a pair of Truth in Lending Act technicalities. One of those technicalities, involving rescission rights, was not involved in the appeals. Hamm lost in the federal district court; Jones, whose case was heard by a different district judge, won. Because both cases involved the same lender and alleged TILA violation, the Court of Appeals joined them in this decision. In its disclosure of the payment stream for the Hamm and Jones mortgages (and presumably in hundreds of others closed in the same period), Ameriquest failed to state the payment period (monthly). It simply gave the starting date, number and amount of the payment series, and the date and amount of the final payment. The finding on appeal in both cases was that, although a reasonable individual could readily infer that monthly payments were called for (other documents signed by both Hamm and Jones described the payments as monthly), Regulation Z requires that the disclosure document explicitly state the payment period. The lower court decision for Jones was affirmed. The decision against Hamm was reversed.

As the court observed, Ameriquest could easily have complied with the technical requirement of Regulation Z by adding the word "monthly" to its disclosure form. One can only wonder how many suits similar to those brought by Hamm and Jones will be pursued to counter foreclosure proceedings.